This is how the egg market works
Eggs are sold by tens of thousands of small farmers every day. Thousands of traders buy and sell eggs every day
On 13 September 2023 the Daily Star published "How the prices of essentials are manipulated" by Kallol Mustafa. In this essay Mustafa made incorrect and misleading statements about the egg industry, and about our company, Kazi Farms Limited.
On the subject of manipulation of egg prices, Mustafa wrote, "North Egg and Kazi Farms jointly decide the price in Dinajpur." This statement is completely false. Kazi Farms has no egg sales officers or egg sales centre in Dinajpur, so there is no way we can decide the egg price there. North Eggs is a rival egg producer: we do not jointly decide egg prices with North Eggs or with anyone else.
Eggs are sold by tens of thousands of small farmers every day. Thousands of traders buy and sell eggs every day. A trader buys eggs from farms in a particular rural area. The first trader sells the eggs to a second trader, who then delivers the eggs to retail shops in a particular town. All these traders are obviously trying to buy at the lowest price. If any egg producer tries to sell eggs at a price higher than the day's market price, traders will simply not buy eggs from that producer. So it is ridiculous to claim that egg prices are controlled by a grand "syndicate" (cartel).
The market price of eggs is determined by supply and demand.
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On the subject of egg auctions, Mustafa wrote that "According to a report by the DNCRP (Directorate of National Consumer Rights Protection) in August last year, large egg-producing firms appointed agents to manipulate prices during auctions." The DNCRP made this baseless allegation when they failed to understand why prices increased in August 2022. In August 2022, the price of diesel was suddenly increased. Immediately after the diesel price increase, trucks went on strike, interrupting the supply of food from rural farms to urban markets. The prices of eggs, fish and vegetables all increased because of the interruption in supply. As the market price of eggs increased, the egg buyers at our auctions also submitted higher prices, and the auction price also increased. There was no price manipulation.
Our egg auctions are held every day to discover the market clearing price. An example will make this clear. Suppose on a particular day, we have 600,000 eggs to sell at our Ashulia sales centre. Suppose our initial price offer is Tk10.00 per egg. After receiving our initial offer price, each customer makes their price offer, indicating how many eggs they want.
Suppose we receive the following bids:
A offers Tk11.00 per egg for 100,000 eggs.
B offers Tk10.30 per egg for 200,000 eggs.
C offers Tk10.25 per egg for 100,000 eggs.
D offers Tk10.20 per egg for 200,000 eggs.
E offers Tk10.15 per egg for 200,000 eggs.
F offers Tk10.10 per egg for 200,000 eggs
The total eggs demanded by the four highest bidders is 600,000, which is the quantity of eggs we are trying to sell that day. The fourth highest bidder, D, offered us Tk10.20 per egg. So our selling price will be Tk 10.20 per egg (the fourth highest price offer). A, B and C will be happy to buy eggs at that price, as it is lower than the prices they offered. All of the four highest bidders, A, B, C, and D, will get the number of eggs they asked for. All of them will pay Tk10.20 per egg, and our 600,000 eggs will all be sold. The two low bidders, E and F, will get no eggs from us that day.
Our selling price is not the highest price offer we received. In this example, the highest price offer was Tk 11.00 (A's offer), but the auction price was Tk10.20. If we tried to sell all 600,000 eggs at Tk11.00, all of the eggs would not have been sold that day. We try to avoid keeping unsold eggs overnight, as eggs are perishable, and spoil quickly in hot weather.
Selling agricultural goods by auction is not at all unusual. Cattle are auctioned in the United States almost every day. The US Department of Agriculture maintains a website with the auction prices in each state (the USDA "Feeder and Replacement Cattle Auctions" website).
Commentators like Mustafa have not understood the problems faced by egg farmers. Small egg farmers around the country are facing an existential crisis. The high cost of feed has forced many of them to shut down. Egg production has declined, which has led to higher egg prices. Today's high egg prices indicate that there is now a shortage of eggs. Importing eggs is a short-term solution to a shortage. However, if the import of eggs forces the egg price to fall too low, even more small egg farmers will be forced out of business.
